High-ticket retailers follow the tech money in S.F., South Bay

Luxury boutiques in S.F., South Bay cash in on tech wealth

Updated 10:36 pm, Sunday, July 13, 2014

The price is right: The Prada boutique became part of the luxury section of the once-solidly middle-class Westfield Valley Fair mall in Santa Clara - one of a glittering string of retail designer names.

The price is right: The Prada boutique became part of the luxury section of the once-solidly middle-class Westfield Valley Fair mall in Santa Clara - one of a glittering string of retail designer names.

The luxury section of the Westfield Mall in Santa Clara, Calif., as seen on Tuesday July 1, 2014. The explosion of luxury boutique stores in the Bay Area as evidence that the newest wave of technology wealth has made the entire Bay Area a magnet for luxury retail. less

The luxury section of the Westfield Mall in Santa Clara, Calif., as seen on Tuesday July 1, 2014. The explosion of luxury boutique stores in the Bay Area as evidence that the newest wave of technology wealth ... more

Women's wear specialist Sultana Lodin, works the Prada Boutique in the luxury section of the Westfield Mall in Santa Clara, Calif., as seen on Tuesday July 1, 2014. The explosion of luxury boutique stores in the Bay Area as evidence that the newest wave of technology wealth has made the entire Bay Area a magnet for luxury retail. less

Women's wear specialist Sultana Lodin, works the Prada Boutique in the luxury section of the Westfield Mall in Santa Clara, Calif., as seen on Tuesday July 1, 2014. The explosion of luxury boutique stores in ... more

San Francisco has a long history as a sophisticated shopping destination for the barons of the denim, railroad and shipping industries. But as old money has given way to 21st century fortunes built on technology and social media, the city has now been joined by the South Bay - a new magnet for luxury retailers swooping in to prospect for gold.

The once solidly middle-class Westfield Valley Fair mall in Santa Clara has opened an entire luxury wing. Conceived in 2012 and scheduled for completion in 2015, the slate of stores includes Prada, Salvatore Ferragamo, Burberry, Louis Vuitton, Tiffany, Cartier, Miu Miu and David Yurman-17 at last count. The first Northern California location of Balenciaga opened last week, while a Saint Laurent for women and a CH boutique (Carolina Herrera) are scheduled to open in November.

Also booming is San Francisco's Union Square. During the past seven months, high-fashion purveyors Alexander McQueen, Saint Laurent for men, Valentino, Carolina Herrera and Christian Louboutin have opened stand-alone shops. Salvatore Ferragamo expanded in a new location, and a new Brunello Cuccinelli and Christian Dior women's store are in the works.

Rich get richer

While experts point to a combination of factors, the key driver behind the luxury retail explosion is the growth of the tech industry and the rise in the number of high-net-worth individuals. According to the Forbes 2014 list of the world's wealthiest, the Bay Area chalked up 56 billionaires, most of them in Silicon Valley - 25 more than a decade ago. The billionaires represent only the tip of the new wealth iceberg. The number of Bay Area millionaires has multiplied, too.

According to Wealth Engine Inc., a research and marketing firm, there are now 237,946 millionaires in San Jose alone.

"In San Jose, the technology industry is creating more millionaires than anywhere else in the country," said James Dean, a Wealth Engine executive. "Combine these newly minted millionaires with thousands of other high-income, affluent individuals who live and work in the area, and you have a consumer base that has a very strong appetite for luxury goods. It's no surprise that luxury retailers are climbing over each other to set up shop in Santa Clara. The once sleepy town has really evolved into a very affluent mini-metropolis."

On a recent weekday morning, Benjamin Sales, a retired Bechtel chemical engineer, and his wife, Nerissa, of San Jose, were browsing at the Valley Fair Prada. They visit the center once a week or more, drawn by its convenience and ambience.

"I like the flooring, the materials, the architecture, the design," he said. "I like the free parking, too. In San Francisco, sometimes I pay $40 a day."

Thriving in S.F.

Not that San Francisco isn't doing just fine. Union Square's new or expanded retail shops join what has long been the home to international high-end retailers, said Wilkes Bashford, who founded his eponymous luxury clothing store there in 1966 and a branch in tech-heavy Palo Alto in 2001. What's different about market conditions today, he said, is that in previous decades, companies were founded in Silicon Valley and workers lived there almost exclusively.

Many still do, but some younger tech workers have chosen to live in San Francisco and commute to the Peninsula's suburbs for their day jobs. At night and on weekends, they're filling the city's restaurants, bars, nightclubs and shops.

"That has led to this wonderful era here in our city of vibrancy," Bashford said, "and although not everyone shares in the affluence, there is enough that it's a very fertile world for luxury retailing."

His stores, which teetered toward bankruptcy during the downturn, were purchased by the independent Mitchells group of Connecticut and given a multimillion-dollar remodel specifically with an eye toward the region's changing demographics.

"We felt comfortable that the Bay Area's growth, mainly due to technology, was going to be a long-term trend," said Andrew Mitchell-Namdar, vice president of marketing for Mitchells, noting that the average customer purchase has increased 25 percent during the past five years.

High-end retailers have shifted strategy away from department stores, opting instead to open a slew of stand-alone boutiques to sell to the public directly, according to national retail observer Pam Danziger of Unity Marketing. And some tech executives are taking more of an interest in fashion. Marissa Mayer, Yahoo's chief executive, and Sheryl Sandberg, chief operating officer at Facebook, are known for wearing designer clothing, while Yelp's Jeremy Stoppelman hosted an in-store event at Dior Homme a few years back.

Fashion forward

"Fashion and technology seem to be evolving and growing together, and Westfield Valley Fair is a merging of these two influential worlds," said Melissa Davison, a mall spokeswoman.

San Francisco also has another class of customers: tourists. In 2013 San Francisco hosted 16.9 million visitors who spent a record $9.3 billion on local businesses, according to San Francisco Travel, a nonprofit tourist and convention association.

Some of these tourists come very prepared to spend. Several luxury retail store representatives, who declined to speak on the record, said business moguls from China, in particular, are keen to purchase very high-end gems to avoid up to 30 percent tax levied at home or designer clothing because they can be assured they are not buying fakes, which are ubiquitous in Asia. Foreign buyers are also snapping up office buildings and luxury homes as investments, or condos for their children to use while studying at American colleges and universities, said Joel Goodrich, a luxury real estate agent with Coldwell Banker.

Not always flashy

With data to support the growth in the population of the Bay Area's uber-wealthy, there's just one question left, for people-watchers, at least: How to spot them? It's tough. Unlike the showier wealthy of Los Angeles, Northern California's wealthy techies play it cool, even when putting down millions in cash on a house.

"It's not important to drive a Mercedes or Maybach - they drive a hybrid," said Alf Nucifora of the Luxury Marketing Council in San Francisco. "And for every one of those shopping at Valentino, I can show you millionaires dressed in T-shirts and black jeans, riding to and from their apartments and condos on a bicycle."

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